Stripe’s $20B valuation gives it a ‘VC-like’ influence over payment tech

In less than a decade, Stripe has emerged as not only a major competitor in merchant technology, but also a company that plays an indelible role in launching other companies.

Stripe’s software development kit, application programming interfaces and other recently added features for merchants place it in almost all parts of the payment value chain beyond its e-commerce forte.

That broad strategy got a big boost on Wednesday via a $245 million investment that propels its value to $20 billion from about $10 billion. The company also reports a slew of major recent customer wins—including Google and Uber.

That gives Stripe access to Google’s wide range of analytics that’s poised to alter the way payment companies match transactions and shopping to advertising. Along with ride-sharing apps like Grab and Lyft, Uber’s at the core of a change in how payments are made toward a more automated transaction. That makes Uber a favored partner for social payment apps and marketing collaborations.

“Stripe is acting like a venture capitalist,” said Richard Crone, a payments consultant. “Startups are turning to them at the developer level. Stripe is known for an easy integration. If you need to get something up and running fast to prove your concept, you turn to Stripe or Braintree to do that.”

Stripe, which did not answer questions on its plans for the new funding, was already growing and expanding quickly, making the new investment an endorsement and a source of fuel for its next moves. Stripe is considering a move into credit to counter PayPal and Square’s forays into financial services. It is also making its Stripe Terminal available to e-commerce clients as a multichannel play.

And in the past few months, Stripe has also added security technology for merchants, started issuing credit cards, pursued partnerships with banks to add more services for small businesses, nabbed WordPress business away from PayPal and collaborated with Microsoft to support email transactions. Part of Stripe's appeal has been its multicurrency capabilities, and part of its strategy is a deeper move into new geographies.

For example, it pushed Stripe Connect, which helps businesses create payment platforms and marketplaces, as a way to reach new user in Europe. More recently, Stripe invested in e-checkout technology in Africa.

Stripe’s strength has been its focus on delivering superior payment capabilities to the most recent generation of online enterprises, said Thad Peterson, a senior analyst at Aite Group, noting Stripe also understands that at its core, payments are “just data,” and as data the payment can be accepted and delivered through any channel.

“Provided they retain their focus on reducing/eliminating payment friction for merchants, they should continue to do well,” Peterson said. “That said, their foray into physical-world POS is new territory for them, and they will be going up against some very entrenched and well- capitalized competitors.”

Stripe's strategy and a long track record of open technology allow it to compete with Square and PayPal, but also feed a broader trend in opening merchant acquiring technology to third- party developers.

Mastercard and Visa have both opened their technology to third-party developers; and Braintree has fueled PayPal's diversification.

“With this investment, Stripe can move further into the value chain, and position for a merger or an acquisition,” Crone said.

It also sets up a battle royal among merchant technology companies. In just a few weeks this spring, PayPal spent more than $3 billion in acquisitions, including more than $2 billion in iZettle to head of Square's expansion in Europe and $400 million to buy Hyperwallet to power mass payouts for the "gig economy" and other use cases.

Square's also been busy, adding support for Google Pay and collaborating with eBay to advance Square Capital.

“There’s more of this to come. It’s not just about e-commerce anymore. Mobile payments blurs the lines,” Crone said, noting the growth of order-ahead and pay apps and the Amazon Go-infused growth of cashierless stores are changing how merchant acquirers compete. “The next wave in payments won’t have a physical point of sale.”